Another example of the importance of starting dates

Back in October, Yglesias reported on how the Trump stock market rally wasn't all that impressive. Other countries' stock market indices had risen by more than ours had. To illustrate this, he included this graph comparing the US S&P 500 with Japan's Nikkei, Germany's DAX, and France's CAC indices:

It clearly shows that, while the S&P500 has risen considerably since Aug 2016, the rise is not as large as the gains experienced by other countries. He concluded:

That said, the fact that stock market enthusiasm over the past year has been worldwide with the United States lagging other key countries seems like a strong indication that Trump hasn’t done anything that’s particularly successful or exciting. ... For whatever reason, markets are up just about everywhere, not only in the United States. And markets generally seem to be up by more in countries with boring, competent-seeming leadership than they are in the United States.

I liked the graph and it is a good idea to think in terms of such counterfactuals, but I also had my doubts. Why normalize all the indices at the end of July, half a year before he became president and months before he won the election? In the middle of the semester I felt it was interesting enough to mention to my honors students while bringing up a concern or two, but I eventually forgot my desire to investigate further.

Well, time to investigate! Compare if you will the following graphs with three different normalizations: Yglesias' end-of-July 2016, the election in 2016, and the inauguration in 2017. I'm extending the data out to today, using weekly closing numbers.

The S&P's relative performance has improved since Yglesias wrote, so that even using his normalization the US is now modestly outperforming Europe and has been for the most part since the Tax Cut and Jobs Act. The Nikkei is still outperforming the S&P by a wide margin, but his conclusion would now have to be that the President's antics haven't harmed the US.

If we normalize just before the election, however, we see that the US is right on par with Japan and outperforming Europe by a wide margin.

And normalizing from the inauguration shows the US ahead of every other country with the most boring and competent seeming Germany performing worst.

So what's the takeaway? We need more crazy antics? I doubt it. My three lessons for today are about how little we know:

1) If you're going to do this kind of analysis, be forthright about why you are choosing your starting dates. Starting dates are everything. That's part of why statistics gets its reputation for lies: you can make the same numbers tell almost any story you want. If you want US stock returns to look as bad as possible, start at July 3, 2016 (really close to Yglesias' starting point) so that Japan is 20 points ahead of the US. If you want the US stock returns to look as strong as possible, go back nearly 3 years ago to June 28, 2015 and give Trump credit for growth that happened during Obama's term, putting the US 20 points ahead of Japan. Or maybe just pick a credible day from which we can justly and reasonably judge the President's performance.

2) Let's please remember on all sides that the stock market is not a great indicator of how the economy as a whole is doing. The correlation may even be negative in the very long run (http://www.businessinsider.com/equity-returns-and-gdp-per-capita-2014-2)

3) Let's not draw too many life lessons about how to run an economy and a presidency until all the data points are in. 

Big bag of blogs

Adam Smith put forward the basic idea of the stationary bandit vs. roaming bandit applied to India. Basically the Britishers overseeing India who expected to leave again were there primarily to take as much they could get their hands on, while those who had a more permanent interest wanted to invest in the country and make it more prosperous. Trying to get the incentives of the temporaries to align was difficult, in part because of the more permanent leaders didn't understand their own interest perfectly either.

People who lived in East Germany were more likely to cheat than people who lived in West Germany.

Cass Sunstein's (and Sumner's) defense of utilitarianism. The most interesting line for me is this argument:

the enterprise of doing philosophy by reference to such dilemmas is inadvertently replicating the early work of Kahneman and Tversky, by uncovering unfamiliar situations in which our intuitions, normally quite sensible, turn out to misfire. The irony is that where Kahneman and Tversky meant to devise problems that would demonstrate the misfiring, some philosophers have developed their cases with the conviction that the intuitions are entitled to a great deal of weight, and should inform our judgments about what morality requires. A legitimate question is whether an appreciation of the work of Kahneman, Tversky, and their successors might lead people to reconsider their intuitions, even in the moral domain.

Large retail chains give higher wages, mostly because there are a lot more middle-management and support positions.

A description of how people lived in Britain 100 years ago. It makes for a fascinating comparison to show how much living standards have improved.

Why you should probably self-publish.

Goldilocks and the Median Voter Theorem

Since two of my vertebrae are now kissing that have no business kissing, I'm going to be teaching from a seated position a lot more, and that means relying a lot more on PowerPoint and other such abominations to teach class. Since the power goes out a lot, it would be useful to have a backup. So I'm going to finally resurrect this blog to put up some notes for my classes that they can turn to during class on their smartphones if the power goes out. This post is for ECO 303 - development - and is an easy introduction to the Median Voter Theorem for our political economy section.

Political economics is the study of how governments make decisions using economic tools. One of the earlier and easier examples is the Median Voter Theorem.

To understand what the Median Voter Theorem is, remember the story of Goldilocks and the Three Bears. In the original story, every bear could have porridge, chair, and bed ideally suited to his or her preferences. This is one of the good things about the market system: everyone can have exactly what they want. With government making decisions, that may not be the case at all. We are much more likely to get one-policy-fits-all. But which policy will we get?

Suppose the three bears' government will only supply one type of porridge, one type of chair, one type of bed. What will the temperature of their porridge be? How hard will their chairs and beds be?

If the three bears decide things democratically, the Median Voter Theorem tells us the answer: it's whatever Baby Bear wants!

Proving I'm Alive: Big Bag of Blogs

Bellemare on Swinnen's paper on who wins and loses from high food prices and on the benefits to rural smallholders of joining marketing chains.

Tabarrok showing me why I should be very, very afraid: Kucinich and co. try a real life enactment of Atlas Shrugged.

Sumner discovers a second career as Bernanke's shrink, showing how his psychology  helps determine the fate of this recession. (If you wanted to be more sensational about it, you could talk about the discovery of the sinister figure in the shadows: Vincent Reinhart. That would be overdoing it a touch.)

The early impacts of AGRA's investment in Ghana, combining fertilizer subsidies, market access, and variable loan structure depending on outcome (essentially removing downside risk).

I was getting ready to run some proper experiments out here, only to learn that my very presence might bias the games. Of course, now this proposes that I need to replicate this (preliminary) finding itself. How general is the result? (HT: Aid Thoughts and Roving Bandit)

Urbanization in Africa is mostly about population growth rather than migration.

Fuel Subsidy: Success or Failure? UPDATED

The way Baobab tells the story, Pres. Jonathan caved. He "bowed to pressure" and "buckled." I'm not so sure.

Consider that previous governments have also tried to remove the fuel subsidy and had no successes to show for it. Jonathan accomplished what his predecessors couldn't, a cut in the subsidy by 40-50% and an agreement that further cuts would be sought in the future. UPDATE: yet it has persisted despite the decreases from previous governments. Jonathan's subsidy reduction is the largest in nominal terms, but is only the fourth largest in percentage terms. The very short-lived Shonekan presidency increased the price of fuel 614% compared to Jonathan's request for 110%. More information here.

In my first reaction and in many people's, the government ought to have done things little by little, gradually reducing the subsidy so people had time to react and respond, and could see that (if) he was genuine in channeling the money to health, education, roads, electricity, and other public goods.

But there is a real political economy argument to be made for asking for the full subsidy in the hopes of getting half. People are no doubt happier and more docile today about a price of N97 per liter than they would have been had the government simply announced N97 on January 1.

Baobab could have just as easily said that the opposition buckled because they had demanded removal of all the subsidy and gave up the strike with a 50% increase in the price of fuel. If Pres. Jonathan succeeds in obtaining further reductions, he will have done exactly what I and others asked, gradually phasing them out.

UPDATE: Having found the above source, I am much less impressed about a 50% increase since it is the smallest decrease on record. What I would like to know is what the non-subsidized prices were during those other regimes, though, which Sobowale does not report.

Best of 2011

Time for some intense naval-gazing. I wasn't going to do one of these, but then I enjoyed others' so much for the posts I missed that it seemed much more interesting.

Top Ten Posts of 2011
1. Google's statement on AUN's amazing internet usage, got a lot of doubting comments and a few  defending and very plausible explanations.
2. Nutrition Labeling, describing the new requirement that meat include information on calories from fat.
3. Unemployment: Leads and Lags - Breaking unemployment into separate decisions to hire or fire will give us a better indicator of where the economy is going (has been) than total unemployment.
4. AEA session on agricultural export bans during the 07/08 food price crisis.
5. Microinsurance in Kenya via cellphone
6. My first visit to AUN. Classes will resume Thursday the 24th
7. Low saturated fat diet vs. low simple carbohydrate diet
8. QE2 and food prices - debunking the idea that the Fed is causing global food price inflation
9. Food safety, food movements, and paternalism
10. Lit in Review: Food Demand -- Ethiopia and Speculators
Honorable Mention (because I thought it was fun): The socially acceptable price of fried chicken, also known as the political economy of fast food markets in South Korea.

Top Ten Posts of 2010 (in 2011)

1. My pictures of the Thorvaldsen's Christus and apostles statues, mentioned in a Church lesson this year.
2. Lit in Review: Grossman and Helpman, there has been steady interest in summaries and other papers that make use of the "Pay to Play" model of lobbyists.
3. Food in Africa: Too much and too little discussing the problem of getting food from food-surplus states to food-deficit states. There was never a large spike, but a steady stream of interest throughout the year.
4. High Hopes for Rwandan Agricultural Development
5. Food Security in Nepal which has been of increasing interest lately
6. Cutting Costs Through ... Fonts?? Some fonts go easier on the printer's ink
7. Population Health vs. Individual Health - commentary on macro vs. micro in economics and health
8. Ethiopian Monetary Policy - combines monetary policy, food prices, Ethiopia's development goals (food self-sufficiency), and growth prospects
8. Five from vacation: education, hyperinflation, and Chinese food safety.
10. Fed governor: if we could guarantee 5% NGDP growth, it would be great - I'm glad this made the list because I think it was my most significant post, interviewing Governor Dudley about what they are targeting and Sumner's policy.

Where did my visitors come from in 2011?

Thankful for small favors

I was introduced to a new term today: Idiocracy (n) - government of the least capable, elected by the least capable of getting a job.

I wondered how to reconcile its pith with the notion of a government of the least capable, elected by the most capable of using public processes for private gains.

Then I saw this comic and smiled at what is missing. Note that the White House, the Congress, and state legislatures are shown packed full of money. "The buck stops here and here and here" indeed. But what is missing?

The Supreme Court. In all the complaints I have heard of that august body, I have never heard anyone claim that it has been or can be bought. Filled with ideologues, all of whom legislate from the bench on the basis of their political leanings, I've heard. Up for sale, no. Today I am thankful for one branch of government that can't be bought.

Drop and give me 20

I mentioned that there was a police checkpoint with a fairly long line. They checked every car and had the motorcyclists get off their bikes to walk them in. If you weren't holding onto a bike, you had to keep your hands in the air. 

I also got some videos of some people who somehow annoyed the guards. Pity the iPad camera can't zoom worth 8 bits of beans. The guards made them frog hop across the road and back again with their hands on their heads. As usual, some of the police stood around with some pretty mean guns, fingers always near the trigger.

We passed through without incident.

One guard threatened to flog a guy with a long, thick looking whip. With our windows rolled up, we couldn't tell what the provocation was, but the guard's intent was pretty clear. The fellow finally complied and frog hopped for a bit, then was allowed to return to his bike without other punishment.

I sit back wondering at the comparative situation. I've complained at the TSA checkpoints before for violating my civil rights. I think that's what it constitutes and I don't believe the US government has the authority to do what they are doing. In both cases there are guys with machine guns staring at me like I'm wearing a shirt from Target because someone else did something heinously wrong. One government lets strangers with minimal qualifications grope me, the other lets strangers with minimal qualifications force me to frog hop. Frankly, I think I'd rather frog hop. On the other hand, TSA isn't allowed to beat me without some pretty serious provocation - I have the protection of at least some law to sue the government back if things get out of hand.

Random Links: food governance, being LDS, behavioral economics

C. Juma on how to improve Africa's research infrastructure - basically, make research institutions more like teaching institutions and teaching institutions more research oriented.

A fascinating Kenyan website called I paid a bribe. The tagline is: uncover the market price of corruption.

The price of orange juice at a 34-year high.

Price transmission in NYC from subway to pizza.

Why are Americans eating less meat? Partly higher relative prices, partly recession, party "Flexitarianism."

WalMart pays Nicaraguan farmers less than other retail outlets, but offers much less price variance in compensation. Since food price variance has increased, this might be a better deal than it used to be.

"What is essential to being a good Mormon? According to the [Pew] survey [of pretty active American members of the Church of Jesus Christ of Latter-day Saints], 80 percent said "believing Joseph Smith saw God the Father and Jesus Christ" is essential to being a good Mormon, 73 percent said "working to help the poor,"" Other interesting sound bites:

• The Latter-day Saints surveyed had a more favorable opinion of Pres. Obama than LDS Senate Majority Leader Reid (25 to 22)
• 97% of us identify as being Christians, believe in Jesus' resurrection, and use the word "Christian" as the single word that best describes us, while 49% of non-Mormons do not think we're Christian
• Most of us rank being a good parent as more important than career or religious activities
• 60% of converts cited church beliefs as why they joined. 60% of converts joined between 18 and 35 years old.
• 82% say they have a food storage, and almost half have 3 months stored up. When Pres. Ensign came to check on us and assess our needs, we were happy to report that we had 1-2 weeks of food stored up and enough cash to satisfy our needs. Water was another story, but we could boil the tap water to make more as needed and had already refilled a 5 gallon (20 liter) drum with boiled water.
• Even though most identified as conservative, we are much more positive about immigrants and immigration than the average conservative.

Asking people to give a lot of examples actually convinces them that something is less likely than asking them only a few examples. It is the ease of coming up with the marginal example that matters rather than the total number.

Bellemare on how to do well in an economics class.

How to prolong lithium battery life.

Lunch for Jonathan and Obama

They do things differently in the US and UK from Nigeria, and yet it's not so very different after all.

There is a delightful BBC show (Lady Thatcher's favorite during her term) called "Yes, Prime Minister." Elegant. Witty. And it introduced the world to public choice. In the very first episode's side story, the PM is cranky because no one is there to make him lunch. The staff explain that the cafeteria is only for staff, not the PM. Because the staff is doing government work, the government pays; but the PM is political, so the government can't pay for his lunch. However, meeting with ambassadors is government work, so he announces he will have lunch with a different ambassador every day so that the government will make his lunch. It goes back and forth quite entertainingly and later fits in to how defence budgets are created. Remarkable stuff.

I also have in my collection an old radio bit called The First Family, a series of comedy sketches around the Kennedy family. There's one where during a meeting of heads of government, Pres. Kennedy tells them he has been taking some criticism for the expense of all the fancy state dinners, and economy starts at home, so today they will be having a typical American businessman's lunch. Hilarity ensures as Castro orders a chicken sandwich with a live chicken, Kruschev wants the eastern half of Adenauer's "Western sandwich", and Abdul Nasser and Ben Gurion find peace over pastrami. At the end of the sketch, the President then asks each of them to pay for their sandwich.

Pres. Jonathan, encouraging us to eat cassava bread
to reduce wheat imports.

Over here, the removal of the fuel subsidies has brought to light just how much is budgeted to feed the President and Vice-President: 1 billion Naira. That would be US$6.5 million by exchange rates. The one data point I have tells me it costs twice as much to feed our family in Nigeria as it did in the States, so a not-quite Purchasing Power Parity exchange rate would put it at closer to $3 million. Still a hefty sum.

The breakdown:
           N477million for meals and catering for the office itself; -- note we're not just buying food, but hiring labor too
           N293 mil for Pres Jonathan's meals at home and office;
           N104 mil for Vice-Pres Sambo's office.
           N90 mil for kitchen supplies - similar to last year - half for the state house, half for the President's home

Among the things I would like to know, based on the humor I've already consumed, is how much of that is for feeding official guests. As my colleague Alvin Lim put it when I asked him that question, "I guess the President can't serve his important guests meat pies."

Over here, they have been touting British and American austerity, expounding on the great poverty of our millionaire leaders. On the other hand, it appears Pres. Obama's $4 million vacation to Hawaii this Christmas was also paid by taxpayers, mostly because it costs $3.3 million just to fly Air Force One there and back again. Another quarter million goes to paying for security's hotel and per diem. FactCheck tells me that Pres. Obama has used Air Force One less than Dubya did in his first two years.

So for which would you rather be taxed? $3mil to feed your leader for a year or $3mil to fly him across country for a one-week vacation?

Development Clashes in India

The Guardian on Polio: "If in India as a whole there are no more confirmed cases before 13 January, the country will have completed its first year without a new victim." That would leave only three countries where polio is endemic: Nigeria, Afghanistan, and Pakistan. IUPDATE: The Gates Foundation twitter feed informs me that it has taken two million volunteers' time each year to accomplish this. Misunderstandings and religious tension - including the War on Terror - have been heavily involved in why it has taken so long in India:

Equally important in overcoming the last bastions of the disease, as in many parts of the world, has been the consent of local religious figures.
Over the past decade one of the biggest obstacles to polio eradication in India, as in Pakistan and Nigeria, has been the resistance of poor, largely illiterate Muslim communities such as those in and around Moradabad.
Even as the first campaigns got underway in the area in the late 1990s, local clerics began telling congregations that the vaccinations were part of a government plan, backed by the west, to make Muslim women infertile. ...
Torabi said that he had attended immunisation clinics in clerical robes to show "that a common Muslim man is able to trust the programme".
He added: "I told them that in nowhere in the Qur'an is it written that we should be unhealthy, or not take care of our hygiene and that if tomorrow our children are suffering from polio then they will not be able to do the prayers properly. Slowly they understood my point."

NPR has details on a conflict between a South Korean steel company -- that has agreed to purchase a large amount of government land to build a steel mill, electric plant, and a port, all while providing training and jobs locally -- and a number of locals whose land is also being taken from them as part of the deal.

Meanwhile, the Economist reports on the private construction of roads and other infrastructure in India, which started out quite optimistic but is now showing signs of overly high debt and other financial distress:

Over the next five years it predicts that infrastructure investment will reach a new high relative to GDP, with some $1 trillion spent, half of it by the private sector. The trouble with this rosy prediction is that the balance-sheets of many Indian infrastructure firms are as potholed as the roads they resurface.

They argue first that firms need more equity, not more debt. Fair enough. The second argument, however, is that the government needs to untangle some of the business transactions. This is an incredibly dangerous suggestion overall. Government's job is to set the rules so that companies act in open, transparent ways, not to wade in and make business decisions. That is an open invitation to corruption and rent-seeking.

"I started the war against subsidies."

Head of the Central Bank, Sanusi, explaining in more detail why he is against the fuel subsidies in Nigeria. There is a pretty thorough description of how the subsidy really supports corruption and some of the evidence of it. Interesting throughout.

So for two years I have been convinced that this thing is a scam and that it cannot be stopped because the entire controls have been compromised. ... So yes, I am willing to take all the criticism and labels and be unpopular but this has to stop and govt can find other ways of alleviating pain.

Removing it has costs in terms of nigerians paying more for PMS-which by the way is not the fuel for genrators, power plants, production facilities, heavy duty goods transportation trucks and even luxury buses. It is fuel used by the middle class and car owners to drove around town and from city to city not to employ workers and produce goods and services. Diesel which is critical to manufacturing and employment creation is not subsidized

1. I am a strong advocate for subsidies if they are for production and not consumption, and if they benefit the poor and not middle men and rent seekers. The US government subsidizes cotton and wheat farmers and nigeria spends its reserves importing wheat from america and keeping american farmers employed....

Finally: removing subsidy is not a silver bullet that solves our economic problems. And there is a huge trust deficit that government has to address. Government needs to investigate subsidy payments and punish any violations of extant guidelines. It needs to cut on unnecessary and waste ful expenditure. It needs to fight corruption and show seriousness in that. It needs to deliver on capital projects, power and infrastructure including irrigation, farm-level storage and agri-processing. These are all valid issues that are to be taken IN ADDITION to and not in place of subsidy removal.

The government's side on the fuel subsidy

The BBC had a brief interview with Ahmed Ali Gulak, Special Adviser to the President on political matters. Among the more interesting talking points, the government claims that prices and protests will have calmed down within 3-4 weeks. Here's hoping it's calmed down by the time classes start!

UPDATE: BBC's interview with the central banker, Senusi, who argues that subsidies should be for production, not consumption; that they should be paid for with savings not debt (our children are paying for our consumption); and that much of Nigeria's subsidies are re-exported to other West African countries. He admits the cost of living to go up and that other prices will rise. It was not unexpected. The crash in Europe and other countries requires greater fiscal responsibility. Improvements may not be seen for 6 months-3 years.

Economics in Unusual Places

1 - Using game theory at a buffet with limited food options to figure out what foods you should choose first (HT: MR). Basically, instead of just grabbing your favorites first, you should think about what other people will grab first (and as importantly, last). If your favorite food is hated by your fellow diners, leave it alone - it will still be there later - and pick up something else that might disappear if you don't grab it now. The article also has insights about the kinds of social norms that make everyone better off, how to pile the most on your plate, and some Wansinkian insights how much women's food choices are influenced by their neighbors.

2 - Some more game theory on why Iran has told the US just how it captured the Sentinal drone: by ensuring that it will only have one to sell, it makes other countries much more willing to pay for that one than they would be if they thought 2-3 more might appear in the next few years. Iran is sending a signal or using a commitment device about its future behavior to impact the actions of its fellow players today.

3 - I reported earlier on how G.I. Joe action figures are not classified as "action figures", but are "dolls" so they can get a lower tariff. The X-Men apparently are marketed by Toy Biz as not being human at all so they can avoid being tariffed at the doll rate altogether and instead get classified as "toys." Little did the X-Men realize their own marketing agents were plotting against their basic humanity, and all in the name of economics!

4 - Are we on our way to a Kuznets Gender Curve? Very poor countries and households can't afford to select children based on gender. As income rises (to the level of India and China, say) there is more and more discrimination favoring boys - medicine can tell families whether the fetus is a boy or a girl and they can react as they wish. However, new evidence is showing that upper-middle class Indian families ($3200/yr and up) are reversing the trend. The Economist praises bourgeouise values for saving the girls.

5 - Cowen pushes back hard on the idea that wealth is power, whether in politics, charity, or the market:

Second, the wealthy in groups do not always coordinate very effectively, to say the least.  ...  Third, many of the very wealthy choose to consume ego rents rather than effectiveness.  Fourth, “democracy” and “the market” control large chunks of modern life, and it is hard for outsiders to commandeer those processes.... the ability of the rich at the margin to control policy through intentional acts, either individually or in groups is much overrated.
Wealth does protect you from the depredations of others, such as being treated very badly by the police or legal system.  In this defensive sense wealth can give you a good deal of power.

Development in India: The element of time

One of the main differences between those who advocate for more government intervention and less is the time scale involved. Those who tend to favor a bit more free market in their society tend to be thinking on a time scale of a generation or two while those who favor a bit more government tend to be thinking on a time scale of either 1 year or 100 years (depending on if they're an environmentalist or not). "Yes, that program will increase the growth rate, but people are starving today," say the one. "Yes, but lowering the growth rate means more people will starve in the future," say the other. Time plays many different roles:

Agriculture repeats itself

Chapter 10 of my textbook on Food Policy for Developing Countries discusses nanotechnology and the fact that companies have a vested interest in ensuring that nanotech does not become the next great consumer scare. To do that, they need to make sure there is public debate, address consumer concerns early on, openly, forthrightly, and without condescension. Governments have an important role to play also in clarifying up front what standards will be required. Having a clear regulatory framework will encourage companies to invest and make it easier for them to demonstrate openly that their products meet safety standards. Here is M. Nestle agreeing on the scope of the problem and supplying some new reports on the subject.

There is a hefty debate brewing on which framework should be used to debate international agricultural policies. Doha is going nowhere slowly. At COP17 African countries had been reasonably unified, but are less so now that South Africa is calling for a greater environmental focus, with Ghana, Mali, and Tanzania prominent on the other side of the debate. One of the better arguments in the article:

Harjeet Singh of ActionAid International said that farmers with fewer than two hectares would only be able to make $3 a year at the present rate for carbon. He said he did not doubt the intentions of South Africa in "pushing for climate-smart agriculture as the answer to agriculture's problems" but added that "climate-smart agriculture could benefit South Africa a lot because your farmers are large-scale and carbon markets work for agriculture on the industrial scale".

Cote d'Ivoire has announced the (re?)formation of a state cocoa board that will take over most of the higher level market functions. The article seems to be written from a Ghanaian-centric viewpoint, worrying about how the CdI board will be able to compete with Ghana's and the likely impact on world prices [which will be lower, duh, because the civil war kept cocoa production and sales much lower].

And for variety, here is an interview with a Zimbabwean crocodile farmer. He has 10,000 crocs at a time, which he exports to Europe and Asia to sell their skins and meat. Among his major costs are importing the beasts to feed the crocs and trying to get enough eggs to keep the project at that size.

Test Questions I Have Used: The price of everything

In the final for my introductory microeconomics students, I posed a question based on a post on Wronging Rights. It involved an NGO buying up AK-47s in Africa to scrap and sell as jewelry in the West as a means of "doing something" about conflict. The question was to identify why this was a terrible idea, thinking about the incentives increased demand has on the supply side. WR subsequently put up a correction based on an email to the NGO. They do not go around buying guns from dealers, but they buy guns that have been confiscated by the government of the Democratic Republic of Congo and the UN. If anything, this encourages the government to confiscate more guns, which should do good things for reducing demand and supply.

On a midterm for the same class, I also posed a question based on the growing gender imbalance in some Indian states. Having 8 women to 10 men ought to increase the "price" of a bride that husbands pay, or in this case reduce the price the family of the bride has to pay the groom's family. This article from the World Bank discusses one campaign to encourage single men to get indoor plumbing and a toilet: No loo, no I do. And what do we find? Single men are becoming much more likely to have a toilet for prospective brides in states that have a low female-to-male ratio.


In class we also debated the ethics of kidney donations just in time for a slough of posts to go up around the blogsosphere about them.

The Lighter Side of Poverty and Unemployment

Some of these are a touch old, but it's one of those "the more things change" things.

Last Dictator Standing

Taking a 48 second break now that I've got my principles' tests written up (HT: DictatorChimp):

Lit in Review: SSA Development

Wantchekon, Leonard, "Deliberative Electoral Campaigns and Transition from Clientelism: Evidence from a Field Experiment in Benin." Wantchekon got permission from the major presidential political candidates in Benin to run an experiment on their campaigns. The randomly selected treatment villages had two town hall-style discussions about important political topics while control villages had the standard rallies. Among the interesting conclusions from his research, rallies cost $15/person to hold but town hall meetings only $2/person; turnout is 5% higher after town halls; and average spending (cash and gifts) to voters was not statistically different between treatment and control groups so that's not what's driving it. It seems that town hall meetings may be the more efficient way to go in national elections.

Aye and Gupta, "The Effects of Monetary Policy on Real Farm Prices in South Africa." They find using a VAR model that both anticipated and unanticipated monetary policy impacts farm prices in the way we would expect (more money supply --> higher prices, big surprise; but lower money supply does not lower prices) but while statistically significant they don't explain much of the variation in what is happening from 1970 to 2010. I wonder if they would have gotten much different results if they looked at  1975-2005 instead and took out the two major episodes of international food price volatility. How much are they driving the small impacts? They also do not attempt to explain how anticipated monetary shocks could have a significant impact or why negative money shocks don't have price impacts. I would hypothesize at least for the latter that it is because of an inflationary shock to supply that the monetary authority chose lower money supply growth, so we wouldn't see a change that direction because of endogeneity problems.

Clemens and Demombynes' latest salvo in the Millennium Villages conflict: the MVP released a paper for the first time comparing progress in the villages to progress in the rest of SSA. Unfortunately, they still do this improperly. What would they have found doing it more properly?

In rural areas of the Ashanti region where the MVP site is located, stunting has been falling just as much as at the project site. The Millennium Village contains less than 1% of Ashanti Region’s population, so even allowing for a generous “spillover” effect of MVP programs to neighboring areas, it is implausible that the village is driving the trend across Ashanti. Comparing the project site to the national trend is likely to overstate the impact of the project.

Blattman reports on the results of an experiment in Kenya by Friedman, KIremer, Miguel, and Thornton, giving education grants to girls in secondary school. In addition to improved test scores and later marriage years, they find improved knowledge of politics and therefore ... more legitimacy for political violence as a way of solving political problems. Ooh. Blattman notes that his own work is starting to find a similar trend in Ugandan women.

Nicita, Olarreaga, and Porto examine "Pro-poor trade policy in Sub-Saharan Africa." They find that the average (of 6) country's trade policies are biased in favor of poorer households, but that developed countries' barriers are biased in favor of richer African households. This suggests, potentially, that reducing average trade barriers in Africa may harm the poor